Great West Life (down 7.9 percent), Bank of Nova Scotia (down 2.6 percent) and Comcast (down 5.6 percent) were last week’s laggards. Great West’s stock price performance has outperformed Manulife’s and Sun Life’s year to date and in the last year. But last week it reported weaker EPS than consensus ($0.66 versus consensus $0.69). The stock was punished. Great West has industry-leading ROE and has less exposure to rising interest rates and equity markets. This profile gives it lower earnings volatility than the other Canadian life insurers. Its valuations are similar to the other lifecos so we will stick to Great West Life. Comcast’s share price came down with the US media stocks on the news that Disney’s ESPN had “minor subscriber losses” and that revenue from cable and satellite partners would fall “a bit short” of expectations. Investors sold media stocks on concerns that traditional cable networks are under attack by “cord cutting” and digital options such as Netflix. Comcast had reported a strong Q2. Both the cable segment and the NBC Universal segment reported strong metrics.

Global Balanced Fund

Last week the MSCI World Index was down 1 percent. The C$ was down 0.4 percent against the US$. The Marquest Global Balanced Fund A units closed at $18.33 compared with $18.71 the previous week.

Laggards were Walt Disney (down 8.7 percent), Time Warner (down 8.8 percent) and Comcast (down 5.6 percent). The media stocks were all taken down by the change in Disney’s guidance for ESPN. Disney recorded record profits but warned that there had been “minor subscriber losses” at ESPN and that revenue from cable and satellite partners would fall “a bit short” of expectations. ESPN is Disney’s live sports cable network. After the Disney report, Time Warner’s and Comcast’s share prices came down on concerns that traditional cable networks are under attack by “cord cutting” and digital options such as Netflix. Time Warner reported very strong Q2 results (EPS of $1.25 versus consensus $1.02). Time Warner has already begun to confront the cord cutting issue. It has begun offering HBO as a direct-to-consumer digital program. Last week, management said that the HBO direct product had only led to a 1 percent decline in HBO cable subscribers. These companies have film studios and theme parks which provide buffers to earnings erosions as they negotiate the new cable landscape. Disney’s pipeline of new films is unparalleled. Time Warner has mid-teens earnings growth forecasts with a strong balance sheet and focussed management. Comcast had healthy subscriber growth in Q2 and its NBC Universal division has been and is expected to continue to do well.